30 April, 2016

Newly independent Greece had an odious debt round her neck

Since
2010, Greece has been the centre of attention. Yet this debt crisis,
mainly the work of private banks, is nothing new in the history of
independent Greece. The lives of Greeks have been blighted by major
debt crises no less than four times since 1826. Each time, the
European powers have connived together to force Greece to contract
new debts to repay the previous ones. This coalition of powers
dictated policies to Greece that served their own interests and those
of a few big private banks they favoured. Each time, those policies
were designed to free up enough fiscal resources to service the debt
by reducing social spending and public investment. Thus Greece and
her people have, in a variety of ways, been denied the exercise of
their sovereign rights, keeping Greece down with the status of a
subordinate, peripheral country. The local ruling classes complied
with this.

This
series of articles analyses the four major crises of Greek
indebtedness, placing them in their international political and
economic context – something which is systematically omitted from
the dominant narrative and very rarely included in critical analysis.

by Eric
Toussaint

PART 3 -
What happened to the repayments of the 1824 and 1825 loans?

It is worth
remembering that repayments were suspended in 1826 and the creditors
refused to come to an agreement with the provisional Greek
government. The Troika finally deposed and replaced the provisional
government with a monarchy. The FF 60 million loan (which was the
equivalent of 124% of Greek GDP in 1833) did not replace the 1824 and
1825 loans (which were the equivalent of 120% of Greek GDP in 1833).
Once the FF 60 million had been repaid, the Troika insisted that the
matter of the 1824 and 1825 loans be settled.

That is why,
in 1878, Greece was pressed into an agreement with the bankers who
held these loans. The old bonds were exchanged for new bonds worth
£1.2 million sterling. This was an excellent arrangement for the
creditors but more injustice for the Greek people. As the amount
effectively transferred to Greece in the 1824-25 loans was no more
than £1.3 million, the creditors had every reason for satisfaction,
especially as some of them had purchased their bonds for next to
nothing. The bankers have continually speculated on Greek bonds,
selling when they start to go down and buying back when they start to
rise.

It is
shocking to see how most of the superficial analysis of Greek debt
claims that Greek public spending was too high and tax evasion was
rife. However, a rigorous analysis of State budgets shows primary
surpluses, with only two exceptions; in other words, all through the
41 years between 1837 and 1877, revenues were superior to expenditure
before debt repayment was taken into account.

Once debt
repayment enters the picture, it becomes clear that it was the sole
cause of the unsustainable debt burden. We are not suggesting that
the Monarchy managed the State budget in the interests of the
population. Throughout history, creditors have typically insisted
upon having a primary budget surplus. A primary surplus is a
guarantee to creditors that a debt can be repaid, as it provides the
funds for repayment. The burden of debt repayment and administrative
supervision exercised by the big European powers are among the
principal reasons why Greece has been unable to establish a growing
economy.

Conclusion
of this part

The 1824-25
loans should be considered as illegitimate and illegal because the
terms in the contracts were unfair and the manipulations by the
bankers clearly deceptive.

The 1833
loan clearly falls into the category of odious debt. The debt was
taken on by a despotic regime dominated by major foreign powers
consolidating their strategic objectives on the backs of the Greek
people, while at the same time catering to the demands of the
international bankers.

The refusal
of the creditors and the great powers to abolish or reduce the debt
has produced long-term effects that maintain Greece in submission and
prohibit real economic development.

The people
of Greece have remained in the thrall of the odious debt that she was
born with.